Barnes & Noble dominates the bookstore business, with 689 stores and 64% of the country's shelf space. Its stores could generate almost $300 million of pretax cash flow in the fiscal year ending in April. The bookstores could be worth at least $10 per share based on a multiple of four times cash flow. The combined value of the bookstores and Nook could top $30 a share, as Barron's noted in a bullish story ("The Underestimated Anti-Amazon," Oct. 29, 2012). The stock then traded at about $15.

Yet the Nook division is self-financing, thanks to outside investments and control of Barnes & Noble's profitable college-bookstore business. Microsoft invested $300 million last year for a 17.6% stake, and committed an additional $305 million over five years. In late December, Pearson put in $89.5 million for a 5% stake.

The retail-bookstore business could generate $2 a share in free cash flow in the current fiscal year, perhaps allowing Barnes & Noble to resume an annual dividend of $1 a share. Barnes & Noble is expected to post a loss of about $1 a share in fiscal 2013, reflecting consolidation of Nook's losses with bookstore profits, as well as significant noncash depreciation and amortization expense.

BARNES & NOBLE HAS IMPORTANT strategic value. It has $7 billion in annual sales, a dominant bookstore business, and an e-reader alternative to Amazon. Microsoft easily could buy the entire company, giving it a big retail footprint and control of Nook.

Barnes & Noble is controlled by its 71-year-old founder and chairman, Leonard Riggio. If he put the company up for sale, it likely would fetch a nice premium to the current share price. That possibility, too, may support the stock.